2. Investing in Broadband

There are still far too many communities without broadband and funding agencies do not have enough money to fund all of the necessary digital infrastructure. It is time to start looking at different ways to expand broadband into unserved and underserved areas.

How can funding agencies get ten times the broadband coverage per tax dollar invested?

Current Investment Challenges of Broadband Planning and Expansion

Unserved and underserved areas exist because there is not enough of a business case (profit) for private sector providers to invest

Many of the unserved or underserved localities have limited resources (financial and staffing) and expertise to develop comprehensive broadband plans that are economically sustainable

Inertia and gridlock that leads to accepting the status quo after spending time and money on traditional feasibility studies that are fundamentally flawed in trying to make a business case where none exists.

Broadband Funding Program Challenges
When broadband funding is available, what evidence can be practically collected from localities and regions to determine whether:

Community leaders are staffed and prepared to develop and launch a sustainable solution? In other words, are they committed and ready?

The project is comprehensive and sustainable

Potential project risks can be identified to avoid failed projects, or unsustainable networks that do not resolve the lack of broadband access

The funding agency is investing projects that will generate the greatest benefits from each broadband investment dollar

Areas remain unserved or underserved because there is not enough of a return (profit) for broadband service providers to justify the investment. However, broadband is digital infrastructure and areas without broadband will lose citizens, businesses, and their tax base. How many communities exist today without roads, electricity, or water and sewer systems? Broadband is becoming as essential. Whether private, public, or private-public partnerships fund broadband, investments will need to be made and financed.

Digital Infrastructure
Infrastructure must address current and future needs. Governments invest in infrastructure because there are public benefits that private sector entities cannot monetize – these are externalities, or what we also call community benefits. Broadband, like roads, is essential infrastructure. Retaining businesses, jobs, and population are all benefits that broadband enables for a community / region, but are off-balance sheet to private sector providers.

Economic and community development agencies know they must address broadband gaps. Despite fiscal constraints and resistance to public investment in infrastructure by vested interests, States are allocating funding for broadband – $10million, $20million or $100 million are significant legislative wins. However, if the cost to expand broadband to unserved areas is $1.3 to $1.7 billion (as was with Tennessee), that will take at least a decade if reliant upon state funding at those levels – and no community can afford to wait that long for broadband. Anyone that can leave, will have left the community for better education, healthcare, public safety, economic opportunities, and overall quality of life. Businesses and high value individuals will be very difficult to retain, let alone attract. Struggling communities will continue an accelerating downward spiral.

In the absence of funding private sector investment, municipalities have tried to establish a municipal or utility-based ISP, taking on a bad business case while competing with incumbents. Often these projects are locked into the traditional mindset of building a municipal retail ISP as “The” solution. Some have been successful, most have struggled.

Funding agencies have tried funding projects proposed by providers to build-out to unserved areas. Preference is given to those projects that offer the greatest matching funding to State dollars. This may be straightforward and ‘checks the box’ for broadband service, but funding one provider to build-out to an area is a subsidy of public funds to one provider. While it may be compelling for practical reasons (such as extending a network footprint) this approach assumes that private providers can and will execute quickly with expansions. However, these projects are building to current demand and may not be able to meet potential broadband demand, nor future digital infrastructure needs. Furthermore, this approach continues dependency on private sector providers who may not be aligned with future digital needs, such as smart community services. Communities will continue to be challenged when community benefits from digital infrastructure significantly outweigh private sector ROI.

Investing in Digital Infrastructure

Another strategy is investing in digital infrastructure which enables funding agencies to leverage 10 times what they are currently receiving from their broadband investments. The 10-fold difference is funding a network build (e.g. $1M for Ammon, Idaho) versus investing in planning to self-finance digital infrastructure (e.g. $100K). Funding agencies can get greater leverage from their broadband investment dollars by helping communities take the right action to invest in their own digital infrastructure than they do by investing directly in that infrastructure themselves.

Funding agencies can play a critical role in their funding and policies. They can invest in communities rather than a network build. Broadband and digital infrastructure are not ends in themselves, but means to enable good-paying local jobs, grow local economic opportunities, and enhance local quality of life.

What can funding agencies do? A pragmatic, evidence-based approach is needed to make important decisions on broadband funding awards, while minimizing additional work for localities. Furthermore, with uncertainty on the level of broadband funding that will be available, an arms-length, objective process to assess and rank potential projects is needed to:

Prioritize where funding should be invested for projects that are essentially ‘ready to go’ because they can be self-financed based on economic feasibility and community returns on investment (retaining and growing local business and jobs, access to health and educational services, etc.). These projects would get help with planning, getting started, and implementing a digital infrastructure approach – which is a more efficient use of State dollars when planning costs one-tenth as compared to directly investing in infrastructure.

More efficient use of public dollars by investing in planning enables areas to self-finance their digital infrastructure allows the remaining available public dollars to be allocated to areas that have the greatest need, but who may not have the means to address their needs themselves.

Determine how funding be more efficiently and effectively spent (infrastructure, technical support, demand aggregation, etc.) based on each area’s identified needs, thereby maximizing community benefits per State dollar invested.

A funding agency’s role is most valuable in helping achieve economic and community development goals, while ensuring communities are ready and have the means to implement sustainable digital infrastructure plans.

Maximizing community benefits per broadband dollar invested

How can funding agencies determine where, when, and how to invest to address digital infrastructure needs of communities?

The first step is for communities to answer the question: Do the community benefits from a digital infrastructure investment outweigh the costs for the community/region?

Based on SNG’s long track record and unique experience in working with funding agencies in this way, we recommend the following:

Create a process for communities to self-opt in by providing a standardized input form localities can complete and provide the necessary information

Those communities that have provided their information will receive an assessment of economic feasibility for their community or region – an arms-length assessment to support their broadband planning. Additionally the localities will have a geographically based phased plan based on estimated demand — to ensure their broadband planning is demand driven.

Outcome from Assessing Economic Feasibility: The funding agency will have an assessment of potential returns from broadband investment for each community / region, which can be ranked in terms of cost-benefit ratios and project sustainability. Additionally, identified municipal cost reductions can be used as matching funds for grant applications. See example of job and business impacts assessed for Custer County, Colorado.

For communities that have participated in the economic feasibility assessment and their proposed projects prove to be sustainable, invite local leadership (council, broadband committees, etc.) to take the Community Readiness for a Digital Future

Leadership teams from each community / region take 10-15 minutes to complete an online survey with objective metrics to assess whether or not they are doing the right things needed to get their project across the finish line. It also uncovers different perspectives between stakeholders – is there alignment, or are there gaps in their perspectives and/or approach? Time, money, and political capital can be saved by uncovering and addressing previously unseen gaps.

Outcome from Assessing Readiness: The funding agency receives a readiness summary of communities and regions who may require broadband funding. This enables the State to have a clear picture of which projects are ‘ready to go’ and which projects may require more preparation and technical support, which can be accompanied with broadband funding.

Based on Economic Feasibility and Readiness findings, prepare a summative ranked list on impacts (increases in GDP, business and job growth, etc.) from State broadband investment dollars with details incorporated on the Readiness of each project – and if needed, how they can be helped to become ready and develop sustainable projects. This is critical input to the success of any broadband planning process at a community and regional level.

An implicit outcome of the steps described above is that communities will reveal their level of interest and commitment to act through their participation. While funding agencies can assist communities, it is essential that the local leaders are willing and able to take action. Funding agencies will know:

Which communities have the greatest need for assistance

What type of assistance they need

How motivated they are to take action on their own behalf

How ready they are to take action

What next steps will be most effective for communities ready for assistance

Every community has different characteristics and faces different challenges. Those with the most need may not provide the greatest impact at a State level, but the benefits and impacts at a local level can be a matter of survival for a community or region. With relatively small investments the state can assist such communities to own their digital future and, collectively, the impact on the State can generate significant economic impacts without impractical and limited investments in the broadband networks themselves.

States and localities know that they need to address their unserved and underserved areas, but with little or no available budgets and huge potential broadband costs to pay for ‘last mile’ they are challenged and rightly do not want to take on an unfunded mandate. What options do elected officials have to ensure their residents and businesses have the broadband they need? Also, can this be done quickly as those who need broadband the most are often the last to get it.

Business Case vs. Economic Case for Broadband

We already know that digital infrastructure investments can more than pay for themselves – see economic case of Ammon, Idaho. Making an economic case for investing work requires looking beyond the private sector business case to add municipal cost reductions, subscriber savings, economic growth, and smart community service benefits. Quantifying these economic and community benefits, SNG’s research shows that they can outweigh the costs of digital infrastructure. Additionally, what may not be financially feasible with a private sector expected return rate over 3-5 years may be possible when financing at infrastructure rates over a term of 15-20 years. Taken together, investing in digital infrastructure can become economically feasible – which enables communities and regions to address broadband gaps in ways they could not before.

The same analysis can be applied at a State or regional level to find out which unserved areas would require financing, rather than grants. No State nor regional development agency has enough funds to cover last mile costs required to ensure universal broadband access – for example, in Tennessee it was estimated to cost $1.3-1.7 billion to build fiber to achieve the FCC’s broadband definition of 25/3 Mbps. Without such funding, States have turned to private sector providers to incentivize broadband investments with matching funding. While this approach can get service to some unserved and underserved areas, there is still significant capital investment needed and funding one provider risks unbalancing the market and limiting competition.

On the other hand, just like road infrastructure and airports, public investments in infrastructure lower capital investment barriers for the private sector – enabling the private sector to reach new customers, provide enhanced services, and compete on a more level playing field.

Helping Localities Take Ownership of their Digital Future

A less costly and more far reaching alternative is for communities and regions to see how they can take their digital future into their own hands. This starts with understanding whether a digital infrastructure approach can be self-financed by assessing economic feasibility to see whether cost reductions outweigh a ‘build your own’ network approach. If the answer is yes, localities can themselves invest in digital infrastructure sustainably.

SNG’s research shows that municipal cost reductions alone pay for local investments in digital infrastructure by 1.3 times over 15 years – or put in terms of payback period, the network pays for itself in 15-20 years just in municipal cost reductions. There are additional community benefits of economic growth, subscriber savings, and smart community services that need to be added to the calculus when weighing community benefits against investment costs.

In summary, investments in local planning are a fraction of the potential capital investment required for last mile and offer a much greater return for every tax dollar invested. By providing technical assistance and funding for planning to uncover where digital infrastructure can be self-financed, funding agencies can get broadband coverage to many more unserved and underserved areas. Furthermore, helping localities own the process of digital infrastructure and transformationenables them to own their digital future as compared to simply funding last mile connectivity.

When cities and counties decide to invest in broadband networks, they face the same business-case challenge as private-sector carriers. The city or county has usually arrived at this point precisely because the private sector does not see enough of a business case for investment, so how is government going to do what business cannot? Government’s advantage as a network builder is not anti-competitive behavior: it is that government and the community gain economic benefits from the network that a private-sector company cannot tap.

How can communities take control of their broadband future?

Many communities continue to struggle with inadequate broadband for their community. Residents and businesses cannot get the quality broadband they need, or any broadband at all. Municipalities are impeded or prohibited in providing new services and the local economy and overall community vitality suffers. Commercial ISPs are unwilling or unable to improve local broadband and yet resist attempts by communities or regions to take control of their broadband future.

Standing still is not an option. The status quo will not change unless communities take the initiative. However, the most common approach to solving the problem is for municipalities to build and operate their own municipal broadband network. Credit to those that do this, but in many cases this becomes a continual struggle to avoid operating losses and recover the investment, while operating in the face of strong resistance and competition.

Here is the root problem. Commercial ISPs do not invest in network expansion or upgrades because there is not enough of a business case to do so for your area. They do not see the payback they need from that investment and they have already captured the most lucrative part of your market. This model of replicating the traditional ISP model and competing in the free market, albeit with more robust broadband, is really an ‘old school’ approach and one that will always be a struggle. You need to ask yourself …

“Can we really build and operate a profitable, competitive network when the incumbent providers, who already have networks and customers, don’t see the business case to invest any further?”

Fortunately, there is a better way available to any locality serious about owning its broadband future. It starts by recognizing and embracing broadband as the essential infrastructure of the 21st century. This approach is now possible because of maturing technologies that allow you to build open access virtualized networks that not only provide the digital infrastructure your community needs, but also is a platform that opens a marketplace for internet service providers. You put local users in control rather of their future than having them held hostage to whatever is available, and you can do this without becoming an internet service provider yourself.

Let’s go out on a limb and say that there is no municipal leader who wakes up one day and says, “What I really want to do is to become an ISP”. This is only a means to achieve your true goal, which is to ensure that everyone in your community can get affordable, quality broadband if they want it. It is about providing internet access, but it is also much more than that. It is about everything you can do with digital infrastructure and smart community services that will make your community a desirable place to live and do business.

Rick Wilson, Projects and Programs Manager for Florida’s Walton County knew they needed better broadband in his region to increase quality of live and more importantly – promote economic advancement.

With a lack of adequate broadband service, Wilson headed to Austin in 2014 to find some answers at the Broadband Communities Summit.

One session he attended featured SNG’s Michael Curri who explained that:

Broadband enabled 39.7% of all new jobs from 2013-2015.

More than half of new jobs within small businesses can be attributed to the Internet.

Local economic growth and secondary investment enabled by broadband expansion is ten times the initial investment.

Michael Curri (left) with Rick Wilson and his team who received 2016 Cornerstone Award

Armed with this and more data, Wilson took a case to the country board of commissioners that investment in better broadband infrastructure was imperative.

“The economic development piece of our pitch was what convinced the board,” explained Wilson. “The name of the game in a rural county is how can we increase the economy and drive economic development. Investment became less about downloading movies faster and focused on economic advancement.”

The board unanimously approved a $1.5 million investment in a cash-strapped county AFTER a final budget had ben approved months earlier. Leveraging e-rate dollars brought a $20 million dollar fiber investment to Walton, an accomplishment that was heralded by both sides of the political aisle.

With the build underway, Walton County was recognized two years later at the same Broadband Communities Summit with the Cornerstone Award for the significant community advancements brought about by the current fiber build.

This webinar, held on June 28, 2017, and hosted by Strategic Networks Group, features Bruce Patterson, Technology Director, City of Ammon, Idaho, and Michael Curri, President, Strategic Networks Group, who cover…

The Ammon Fiber Network
– How the network came to be
– The Economic Case for Investing in Broadband
– Ammon’s Economic Benefits
– Uncovering the quantifiable benefits of a build, or debunk a case for broadband – quickly

SNG Examines the Economic Impacts of a Locally Owned Network

In advance of SNG’s announcement next month of an exciting new offering called the Economic Feasibility Assessment, SNG’s analysis was featured in the pre-Broadband Summit issue of Broadband Communities Magazine. Included in Michael Curri’s article, “A Local Ownership Approach to Broadband” is a deep dive on a case example (Ammon, ID) and the benefits. It’s a deep dive to explain how a locally owned network can pay for itself, saving the municipality, businesses, and households money.

This article is based on the cost and benefits a locally owned network brought to the City of Ammon, Idaho. The Broadband Benefits Assessment is an application of SNG’s Economic Feasibility Assessment – a pragmatic alternative to longer and more costly feasibility studies. It is foundational to a sustainable project and first planning step because it answers the key question: Do the benefits of this broadband infrastructure investment for our community/region outweigh the costs? The Broadband Benefits Assessment applies this methodology to broadband investments that have already been made (i.e. ex-post).

Cost savings for households and the accompanying consumer surplus for local spending.

Economic growth from increased business competitiveness and productivity.

Smart community service benefits.

Any community considering taking its broadband future into its own hands needs to understand and quantify the economic and community benefits such an investment would require. In some cases, municipal cost reductions alone outweigh the costs of building digital infrastructure.

Read Ammon, Idaho’s Broadband Benefits Assessment Report

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Watch the Webinar: Is a Locally Owned Broadband Network Right for You?

Yesterday the Tennessee Department of Economic and Community Development (TNECD) released a comprehensive report examining broadband supply and demand statewide.

When Tennessee first approached SNG late in 2015, the state was clear that there indeed were issues with sufficient broadband, especially in rural areas and that broadband was a “crucial factor in the economic success of their communities.” Tennessee was looking at answering several questions including:

What should the state’s definition of broadband be?

How many Tennesseans do not have access to broadband?

What is the cost of bringing broadband to Tennesseans that do not have it?

What are best practices and lessons learned for promulgating broadband from around the country?

This report is significantly different than the “standard” as it examines broadband using a holistic approach to assessing availability and need. It is the first time that both broadband supply and demand have been assessed at a state level.

By Michael Curri – Broadband networks can create a “platform for productivity, competitiveness and innovation” in your community – delivering the infrastructure to capture economic and social opportunities, some known, some yet to be invented. Many communities fail during the broadband strategy, build-out and adoption phases as they lack focus and/or sufficient investment of time, energy, and resources.

Too often communities develop strategies based on following recipes from other regions. Instead of uncovering what the needed resources are, or how to leverage current efforts to best serve the specific and unique needs of the community, civic leaders race to “do what they did.”

There is no ‘one size fits all’ solution for successful broadband strategies that bring economic and civic benefits to a region and its citizens. Each community not only has different needs, but different strengths to best leverage the broadband platform. Strategic Networks Group (SNG) has for years been helping governments, at municipal, regional and national levels, to best understand where investment will make the biggest impact – and each and every time the best approach involves following the Broadband Lifecycle, or path to owning your digital future.

In The Economist: IF YOU want to save money, cut the cord. In these difficult times ever more Americans are heeding this advice and dropping their telephone landlines in favour of mobile phones (see article). Despite some of the flakiest mobile-network coverage in the developed world, one in four households has now gone mobile-only. At current rates the last landline in America will be disconnected sometime in 2025.

Good. Mobile phones offer individuals more freedom. Yet confronted by the inexorable march of progress, America’s telecoms regulators have failed to respond.